“ENGIE will invest €1 billion in energy efficiency”, Isabelle Kocher

In an interview published by the financial newspaper, Les Echos, on December 10, 2017, Isabelle Kocher, CEO of ENGIE, announced a €1 billion investment plan over the next five years in the energy efficiency of buildings in France. This is a commitment that supports the fight against global warming.

Interview with Isabelle Kocher in LesEchos.fr

Les Echos: As the head of a large energy company, what are you expecting from the climate summit being held on Tuesday in Paris?

Isabelle Kocher: First of all, this summit is a strong symbol, following Donald Trump’s decision to pull out of the Paris Agreement. What is positive is that this decision hasn’t changed the course of history. Paradoxically, it has even given a wake-up call to a number of American states, such as California. There is no longer a discussion over the need to take action. All that matters now is how quickly we can do something. The current pace will not allow us to achieve the scenario of restricting warming to 2° C. We have to go faster.

What do we have to do?

Remove the barriers, and put a stop to inconsistencies. How? By setting a floor price per tonne of CO2, for instance, as the United Kingdom has done. I recommend fixing it between €20 and €30, for France as well as for Germany and Benelux, at least. The current price in Europe is between €5 and €7, which is much too low. It encourages increased use of coal to generate electricity, in particularly Germany.

Another barrier is that of finance. In Africa, needs for electricity are enormous, the renewable resources are there, but projects are not getting off the ground. Only two large power generation units were commissioned this year for the entire continent. Why? On top of the political risk, the projects are not big enough for investors. A lot of small projects need to be combined in order to attract investment funds. This requires a great deal of work on standardization. The Terrawatt Initiative foundation, which I chair, is working on these issues, devising a model for a standardized contract.

In what way do companies play a legitimate part in the fight against climate change?

The challenges we face are less and less in the hands of governments, which are not the only ones to make decisions. What makes energy transition unusual is precisely the fact that that we are in the process of shifting to a system directed by much smaller, decentralized entities. Consumers play an increasingly active role, local governments put regulations in place, and companies take investment decisions that have an influence on changes.

How is ENGIE investing in these areas?

One of the key focuses of our development is improving energy efficiency, especially the energy efficiency of buildings. We intend to invest €1 billion in France in this area over the next five years, by signing energy performance contracts with our customers. We already have around four thousand in place, mostly with companies in the service sector. With these contracts, our remuneration depends on the energy savings that we make possible over a period of ten or fifteen years by replacing boilers, improving insulation, installing sensors, and so on. We are committed to achieving savings of between 20% and 30% on our customers’ energy bills. At a worldwide level, these activities represent €700 million of current operating income today, a figure we expect to be multiplied fourfold by 2026.

ENGIE is a transporter and supplier of gas. Isn’t it paradoxical for you to be encouraging a reduction in energy consumption?

Whenever the potential for energy savings exists, consumers will look for it. For a French household spending an average of €1,500 per year, a saving of 20% is not negligible. This is an inevitable development. It makes more sense for us to position ourselves on this opportunity rather than trying to prevent it. Especially as ENGIE has everything in hand to benefit from it, unlike other energy suppliers. We have 100,000 employees who operate every day on our customers’ premises.

Some people are finding it hard to understand such a radical shift. ENGIE is selling off high-margin businesses in electricity generation...

But we’re reinvesting! Although our future projects are smaller, taken together they constitute a significant mass. In the past two years, we have sold off or shut down 8 GW of coal-fired power plants, but in the same timeframe we have built and commissioned almost 6 GW of capacities in renewable energies and we have won contracts for an additional 6 GW since the start of our 2016 plan. The profitability criteria are the same, which should mean we end up with comparable margins.

The transformation of ENGIE began two years ago. Is it nearly complete?

We’re over the worst. We’ve completed nearly 90% of our €15 billion asset disposal program and we’re on track to reach our cost reduction target of $1.2 billion by the end of next year. We are investing €1.5 billion in future-oriented businesses such as hydrogen and green gases, which will ensure future growth.

ENGIE Chairman Gérard Mestrallet will be relinquishing his position at the next Shareholders’ Meeting in May. Are you in favor of combining the functions of Chairman and CEO?

This is a question that we will address at a Board Meeting in due course. It’s too early for me to say at this stage.